Vodafone India announces merger with Idea to become the biggest telecom entity in India

Post the amalgamation, Vodafone will hold 45 percent and Idea will command over 26 percent in the combined entity, which will have 400 million subscribers.

Idea Cellular Ltd. and Vodafone India Ltd. have announced that their respective boards have approved their merger, excluding Vodafone’s 42% stake in Indus Towers Ltd, to create the largest telecom company in India.

The combined firm would possess almost 400 million customers, twice as big as AT&T Inc. and exceeding the current market leader Bharti Airtel Ltd. Moreover, it would also have 35% customer market share along with 41% revenue market share in India.

The new telecom leader would be worth $23.2 billion, based on the current evaluation of $12.4 billion for Vodafone India and $10.8 billion for Idea Cellular Ltd.

Vodafone will be the dominant partner in the combined entity owning 45.1% after transferring 4.9% to the promoters of Idea Cellular for Rs 3,874 crore.

Kumar Mangalam Birla and other promoters of Idea Group will hold 26% and the remaining will be owned by the public. It is also reported that, promoters of Idea will also have the right to buy 9.5 percent stake in the combined company valued at Rs 130 per share.

Prior to completion of the merger, Vodafone and Idea aim to sell their standalone tower assets and Idea’s 11.15% stake in Indus Towers to reduce the leverage in the combined entity.

As a result of this merger, Vodafone will cover a new milestone of becoming the world’s second-largest wireless operator. After the completion of the deal, Vodafone India would completely be deconsolidated from Vodafone, decreasing Vodafone Group's net debt by $8.2 billion and reducing Vodafone Group leverage by about 0.3x Net Debt/EBITDA.

The merger should be completed within the next 2 years and it is subjected to approvals from creditors, shareholders, stock exchanges, SEBI, the telecom department and Competition Commission of India.

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